A shift in demand to the right means an increase in the quantity demanded at every price. For example, if drinking cola becomes more fashionable demand will increase at every price.

Factors Affecting Demand

• Price of the Product. There is an inverse (negative) relationship between the price of a product and the amount of that product consumers are willing and able to buy.
• The Consumer’s Income.
• The Price of Related Goods.
• The Tastes and Preferences of Consumers.
• The Consumer’s Expectations.
• The Number of Consumers in the Market.

The various factors affecting demand are discussed below:

• Price of the Given Commodity: It is the most important factor affecting demand for the given commodity.
• Price of Related Goods:
• Income of the Consumer:
• Tastes and Preferences:
• Expectation of Change in the Price in Future:

When T increases (decreases), all else constant, the IS curve shifts left (right) because taxes effectively decrease consumption. Again, these are changes that are not related to output or interest rates, which merely indicate movements along the IS curve.

SOLUTION. There is a direct relationship between income and demand in case of normal goods.

Basically, a negative income elasticity of demand is linked with inferior goods, meaning rising incomes will lead to a drop in demand and may mean changes to luxury goods. A positive income elasticity of demand is linked with normal goods. In this case, a rise in income will lead to a rise in demand.

What is the relationship between income and demand? An increase in income increases demand. Demand is elastic when a given change in price causes a relatively smaller change in quantity demanded. Demand is unit elastic when a given change in price causes a proportional change in quantity demanded.